Alan Kohler was making a comment on today's news about how the...

Alan Kohler was making a comment on today's news about how the US$ has rallied once the Federal Reserve announced its Quantitative Easing programme part II. Basically he said that when rumours of QE2 emerged, the US$ kept getting sold off. When the QE2 was confirmed by the Reserve, the US$ dollar rallied. He made the observation that this was an example of "Sell the rumour, buy the fact." Basically, the folks who were shorting the dollar started covering their shorts when QE2 was announced. In the land of stocks, the equivalent would be "buy the rumour, sell the fact".

What is the relation of this to Telstra? Basically we have witnessed the first step in many which may result in Telstra getting the equivalent of 90c+ a share under the compensation deal with NBN Co. If you like, the 90c+ a share uplift is the "rumour" in this case. The theory of "buy the rumour, sell the fact" dictates that stocks will continue rising UNTIL the fact eventuates. So in theory, TLS shares may rise even beyond the 90c+ before the first cent from the 11bn compensation payout is received. Stock prices are dictated by sentiment and not fundamental value. If fundamental values ruled, TLS shares should never have reached $2.60 let alone $2.55.

I will be keeping my trading parcel until the draft NBN agreement is presented to Telstra shareholders in December when I expect a mini-profit-taking dump before a rally until deal consummation.

And before I get carried away, the Future Fund should not be forgotten. They might take this opportunity with the rally in the share price to do another largish placement so need to keep an eye for any left-field announcement from that mob.